Jobs must be our focus

Testimony on S2270, economic development legislation before the state’s Committee on Economic Development and Emerging Technologies.

This is an important piece of legislation, and I’m proud to have filed it with my colleague, Senator Karen Spilka. It’s important because it addresses our most pressing concern right now. Jobs.

We’ve got to start, not just creating jobs, but retaining jobs once we’ve created them. … From 2000 to 2007, the Commonwealth churned 674,000 jobs a year. … We grow them, and then we lose them. And, since 2003, Massachusetts has lost a total of nearly 250,000 jobs, while the national economy added jobs. This has to change, especially as we continue to deal with this recession.

In January, our statewide unemployment rate jumped to 9.4 percent after losing 8,400 jobs in December. To counter this trend, we need to create a business-friendly environment that will stimulate job growth and improve the ease with which businesses can operate in the markets they serve, and to coordinate economic development activities funded by the Commonwealth.

The Senate bill streamlines the state’s economic development agencies, which right now are too numerous without any cohesive mission. Plain and simple, the model we have right now just isn’t working. There’s too much overlap and no coordination. We need to restructure and streamline this vast network of agencies and create a more efficient model. That’s what this bill does.

Currently, there are at least 31 public, quasi-public and private agencies involved in economic development efforts in Massachusetts – some of which no longer do what they were originally intended to do, and many that do not have direct oversight or accountability.

This bill pulls many of these agencies together, eliminates some, and improves overall coordination and oversight. For example, in an effort to focus on tourism and trade, and be consistent in our efforts and our messaging, this legislation creates the Massachusetts Marketing Partnership to coordinate and oversee the efforts of like-minded agencies such as the Office of Travel and Tourism, the Trade Office, the Export Center, the Sports Partnership, the Film Office and the Cultural Council.

The bill also requires the Massachusetts Office of Business Development to contract with regionally-based organizations to act as the primary contact for business. This proposal, modeled on the successful regional efforts in North Carolina, will make our state more responsive to the needs and inquiries of businesses.

Finally, the legislation maintains the functions of our quasi agencies, such as MassDevelopment and MassPort, but provides better oversight and accountability by having the Secretary of Economic Development as chair of these agencies’ various boards.

To follow up and maintain these efforts, the bill also creates a Sunset Advisory Commission “for the identification and elimination of waste, duplication and inefficiency in state government agencies and authorities.”

If the model works better, that means we create a better opportunity for businesses to locate here and to grow here. That means more jobs.

Another feature of the bill is a study to determine what the effectiveness of a state-chartered bank would be for the Commonwealth. Now, to reiterate, this is just a study, but one we thought was worth looking at for a couple reasons. Credit is tight right now, and we need to free up lending again if we want to see stabilization and growth in our small businesses.

We looked at North Dakota as a model and where they have had good success with a state bank since 1919. That doesn’t mean it would translate here in Massachusetts. We don’t want to compete with community banks. But, again, it is worth studying when you consider, as the researcher Ellen Brown has noted, that “97 percent of the money supply has been created by commercial banks by turning loans into deposits. But that credit machine has frozen up. A state bank could get it flowing again.”

Whatever we can do to help stimulate businesses, and therefore create jobs, we must do now. Businesses, and increasingly small businesses, are the cornerstone of the Massachusetts economy.

Meet the Author
A recent report by the Pioneer Institute, “Failure to Thrive,” makes startling and provocative findings about business size in Massachusetts. Between 1990 and 2007, the number of firms in Massachusetts increased 67 percent. But the average size of those firms has shrunk almost 40 percent.

In 1990, the average firm in Massachusetts employed approximately 17 people. By 2007, the average firm size in Massachusetts was almost exactly 10 people. The combined effect of these two trends is flat employment levels.

That report also suggests new directions for our state’s efforts to grow our economy. As I mentioned earlier about job “churn,” new firm births during that period created 3 million jobs in Massachusetts, but new firm deaths destroyed 3.4 million jobs in Massachusetts during that time period.

The report concludes that these two events – firm births and firm deaths – account for 57 percent of all job flux in the state during that period.

Far and away, the next biggest contributors to job flux are firm expansion and firm contraction. Firm expansions and firm contractions combined account for 41 percent of all job flux in the state during that period. The idea that we lose jobs due to people leaving the state, or gain jobs because of people moving into the state, is out the window. The data presented in the study show that just 2 percent of all job change in Massachusetts between 1990 and 2007 was attributable to firms moving into the state, or firms leaving the state.

This proves that we should be focusing our efforts on existing businesses and on encouraging the creation of new business. By improving the business climate for small businesses, we are addressing the most critical component of the Massachusetts economy.

For instance, the bill proposes to require state agencies to evaluate whether a proposed regulation would encourage or deter the formation of new businesses. It would also require state agencies to minimize the impact of state regulations on small businesses. This bill fits squarely within the recommendations of the Institute’s report.

In closing, I would like to say that it’s easy, at this time, to be pessimistic about the future of the Massachusetts economy. We all know people who are unemployed, or underemployed, or struggling to stay in their homes and put food on the table. But we have reason to be optimistic about our future.

We have things that other states want:  Our public and private higher education institutions; our access to health insurance; our top-rate hospitals and life science centers; and our innovative and competitive companies. And I believe there is real momentum behind our collective efforts to improve the business climate here in Massachusetts.

For instance, as of Jan. 1, our corporate excise rate dropped from 9.5 percent to 8.75 percent – part of a three-year plan to reduce our corporate excise rate to 8 percent that will save corporations more than $100 million annually when fully phased in. Other efforts include freezing the rate schedule for unemployment insurance, which we just did last week, tax incentives for small businesses to create and retain jobs, and relief for small business health insurance costs.

The Senate bill is a critical piece of these efforts, and I look forward to working together to get these things done for the Commonwealth.

 Therese Murray is the president of the Massachusetts Senate.